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Illustration: David Manion |
Two years after the start of the Russia crisis, western bankers are leaving Moscow in droves. Political risk has also been rising across the rest of the region, taking the shine off equity markets and curbing enthusiasm for investment, while over-liquidity in local banking sectors has all but killed off nascent corporate bond markets.
Volumes in equity and debt capital markets are down to levels not seen since 2003. Even M&A, a regional bright spot, is at post-financial crisis lows. By early December 2015, net investment banking revenue for central and eastern Europe had reached just $322 million, according to Dealogic, barely a quarter of the total generated in 2013.
“Pure investment banking doesn’t pay that much at the best of times, and since the Russia freeze, the wallet in CEE has become very small,” says one senior banker.
Or as another exasperated banker puts it: “We’re riding pretty high in the league tables. But to be frank, that isn’t worth much these days.”
It is hard to overstate the effect of the Russia shutdown on regional flows. In 2013, the country accounted for roughly half of all primary equity and bond market activity in CEE, nearly 60% of M&A, and two-thirds of total revenues.
